|Restrictions on Owning Real Property
||What Are Contingencies?
||Title Recording Process
There are a myriad of federal, state, county, and local laws which restrict what you can do with the real property that you own. Enforcement of these laws typically resides with various governmental agencies that are responsible for keeping you in compliance with these laws. The three most common restrictions imposed by government are:
Zoning - Restrictions on the use of the property as to residential, industrial, agricultural, or commercial purposes are very common. The size and height of improvements attached to the property are likewise subject to restriction.
Environmental Hazards - What materials can be stored on the real property as well as who is responsible for removing environmental hazards from real property (such as asbestos, lead paint, petro-chemicals, radon, and toxic wastes) are government regulated.
Public Easement & Right Of Way - A portion of the real property may have to be left open for others to use. Easements and right of ways are used to allow access to other property, to provide for roads and sidewalks, and to enable electric/gas/telephone/sewer lines to be installed. A broader discussion of easements appears below.
Violation of government law can result in fines, penalties, injunctions, and even criminal prosecution resulting in you being sent to prison.
Contingencies are escape hatches in a real estate contract. They let you walk away from the deal without penalty if certain conditions are not met. You might, for example, sign a contract to buy a building, but make your obligation to close contingent on things such as the following:
- Your Being Able to Get a Mortgage Loan of at Least 75% of the Purchase Price
- Your Having a Contractor Inspect the Condition of the Building & Your Being Satisfied with the Contractor's Report
- Your Determination That the Building Can Be Renovated to Your Satisfaction
- Your Being Satisfied with a Report You Will Order Concerning Environmental Hazards
- Your Lawyer Can Help You Put the Right Contingencies in the Contract for Your Deal
Once an order is received, the countdown to closing begins. Timing is essential; to make sure all the ingredients for a successful closing are in place for your arrival. When the contract or escrow agreement is received, the settlement agent will review it for completeness and accuracy. If an earnest money or deposit check is received, the settlement agent will see that it is promptly deposited into an escrow account, where the funds will remain until the time of closing.
One of the first things the settlement agent does, upon receipt of an order is to request preliminary title work. The title company searches and examines the title and prepares a title commitment or other form of title evidence. This is then forwarded to the settlement agent. Upon receipt of the title commitment, the settlement agent checks the information for completeness and accuracy and makes note of any requirements, which must be satisfied. The agent compares the commitment to other documents, such as the contract and loan closing instructions, making sure all information is consistent.
While the title evidence is being prepared, the settlement agent is busy coordinating other matters. If the contract calls for a prior mortgage to be paid off, the agent will order payoff figures from the existing lender.
If the buyer is assuming the loan, an assumption package will be ordered showing the status of the loan.
While each closing is as unique as the people attending it, much of the behind-the-scenes work leading up to the closing is fairly commonplace for the skilled professionals performing it.
Ordering property inspections, surveys, and termite reports are typical of what's happening behind the scenes at this point in the settlement process.
The settlement agent brings any problems or discrepancies that may be discovered to the attention of the appropriate parties so that they can be corrected. It is his or her job to facilitate cooperation, coordination, and compliance between all settlement service professionals involved with the transaction.
Everyone working together helps make the closing a cause for celebration.
Once the preliminary work is complete and all information on the contract, loan closing documents and title commitment has been compared and complied with, the settlement agent is ready to prepare the HUD-1 Settlement Statement. All costs must be shown on the HUD-1. This includes costs paid at closing as well as pre-paid costs, such as earnest money deposit or loan application fee. If you are a buyer and are obtaining a loan to purchase residential property, your lender has three days from the time of the loan application to provide you with a Good Faith Estimate of your loan costs. Within those three days you should also receive a copy of the HUD-1 Booklet, "Buying Your Home," which outlines the settlement process.
As closing day approaches, the settlement agent orders any updated information that might be required. Once the settlement agent is satisfied that the paperwork is in order, he or she confirms the date, time, and location of the closing with all the parties involved. The closing is where it all happens. Everything done behind the scenes leads up to this day. It's time to close the transaction and transfer ownership of the property from the seller to the buyer. If that buyer is you, welcome to your new home!
When you purchase real property, you will receive a written document (called "the deed") which transfers the ownership (title) of the property to you as the purchaser. The deed gives you formal title in exchange usually for a specified amount of money. The conveyance of real property is not complete until the deed is delivered to you or your authorized agent.
When you get the deed, you should record it with the county recorder in the county where the property is located. The purpose of recording the deed is to give "notice to the world" that you now have an ownership interest in that particular piece of real property.
Recording also tracks the chronological chain of title. Anyone who wants to know who owns a piece of real property can check the records of the county recorder for the county where the property is located.
Before you purchase real property, you can follow the chain of sales and transfers of the property - from the original grant of the land all the way to the current owner.
When title insurance is purchased, the title insurer checks the change of title to determine whether any defects occurred in prior conveyances and transfers - defects may then be pointed out and excluded from coverage.
As a purchaser of property, you want to check that every time in the past, when the property was transferred, the grantor had clear title to the property and the previous purchasers obtained clear title. If someone in the past got less than "the whole bundle of sticks" you will not get clear title.